Warren Buffett did his quarterly kiss-ass fest with CNBC last week, and was asked by CNBC reporter Becky “hot legs, but not brain” Quick if he would buy Apple ($AAPL).
Buffett said that he had talked to Steve Jobs many times over the years about Apple, but that he was always concerned about the company’s huge cash pile. Also Buffett,as you know, has never invested in or will invest in technology companies, even though many people have argued that Apple is really a retail company.
But the most interesting point of the whole portion on Apple, was Buffett’s point that he did not like Apple because it held too much cash, which is something I think the everyday investor would think is a positive, too much cash.
See Warren Buffett, like him or not, is the greatest evaluator of companies that has ever lived, and he understands that the most important concept in investing is Return On Capital. Cash has a zero return on capital right now, so Apple is earning zero yes zero % on all of the cash the company is holding. That is not what a Billionaire Investor, like Warren Buffett wants to see, he wants a company using all of its cash to put back into into its company’s operations, and he wants to see that cash produce at least a 15% return on capital.
So bottom line Warren Buffett would absolutely not buy Apple, and nor should you, because the company is earning 0% on all of its cash, instead the company should be plowing that cash back into new products, or at worst buying its stock back, which could produce a 15% annualized return on capital.
That brings me to an exciting piece of news, a good friend of mine who was a top reporter in New York City just sent me over the most extensive collection of interviews and quotes on Warren Buffett I have ever seen in my life its over 100 pages and he has given me exclusive permission to use this.
Basically this file has has every interview Buffett has ever done and every investing advice Warren Buffett has ever dispensed in public over the last 40 years.
I read it this weekend and bottom line its amazing.
Therefore I am thinking of giving it away free as an ebook to anyone who subscribes to the Billionaires Portfolio for a year. I think this file is easily worth thousands of dollars because of all the incredible investing knowledge that Buffett has given over the years.
There is one interview from Forbes in the 1980′s where Buffett says that he guarantees that he could make 50% a year in the stock market every year, by just using a few simple techniques. Imagine if you could make 50% a year!!
Like always if you have any suggestions or questions please email me at firstname.lastname@example.org
Editor of The Billionaires Portfolio